THEMATIC REPORT 05

China Commercial Water Purifier Industry Edited by China-Italy Chamber of Commerce

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TABLE OF CONTENTS

1. Overview of Commercial Water Purifier Industry ..........................................................4

2. Analysis of the External Environment for Commercial Water Purifier Industry ....................................................................................................................................................7

2.1. Analysis of the Impacts of Macro Environment on Commercial Water Purifier Industry ..........7 2.1.1. China's per capita water resources ......................................................................................7 2.1.2. Problems and Pollution of Water Environment ...................................................................7

2.2. Analysis of Technical Policy Environment ...................................................................................7 2.2.1. Implementation of the First Mandatory Standard in the Water Purification Industry ........7 2.2.2. Gradual Improvement of Industrial Safety Standards .........................................................8

3. Demand Analysis and Prospect Forecast Concerning the Commercial Water Purifier Industry in China ...................................................................................................9

3.1. Demand Market Capacity and Market Penetration of the Commercial Water Purifier Industry ..............................................................................................................................................9 3.2. Demand Prospects for Subdivided Products of Commercial Water Purifiers .......................... 10 3.3. Demand Development and Driving Factors ............................................................................. 11

3.3.1. Increasingly Serious Water Pollution ................................................................................. 11 3.3.2. Low Penetration Rate and Large Potential of Commercial Water Purification Market ... 12

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1. Overview of Commercial Water Purifier Industry Commercial water purifiers in this report refer to the commercial water purification equipment in general.

Commercial water purification equipment is a miniaturized advanced water quality treatment device. Its

main function is to reduce or remove various harmful inorganics, organics, metals and non-metal ions, high

hardness, odor, chroma, residual chlorine, etc. The technology types include ion exchange, activated carbon

(particle type, fiber type and felt type), polyester non-woven fabric, UF/MF membrane, RO/NF membrane

and other technologies. Water purification equipment generally adopts combined filtration processes, such

as ion exchange-activated carbon, filament winding filtration-hollow fiber MF/UF membrane, activated

carbon-ultraviolet disinfection, pre-fiber filter-RO-post-activated carbon filter and other types of combined

processes. Generally speaking, water purification equipment has undergone the development process from

ion exchange, activated carbon adsorption, and filtration to desalination, with a core technology

development trend similar to the standard process of China's municipal water treatment plants. The

membrane filtration is becoming the mainstream of the third generation of urban drinking water

purification process.

Technology Type Technical Principle Function General Name of Relevant Products

Filtration

General filtration

Filtration with filter screens, such as non-woven cloth

Intercepts solid particles, such as rust and large particles, at a general filtering particle size of 5-200UM

Pre-filter

Sand filtration

Water filtration treatment process using natural quartz sand, manganese sand and anthracite as filter materials

Intercepts solid large particulate matters, at a general filtering particle size of 5-200UM

Pre-filter

Membrane filtration

UF Filtration and separation technology using the sieving function of membrane

Removes particles, bacteria, viruses, humus, etc., at a filtering particle size of 0.002-0.1UM and an operating pressure of 0.1-0.25Mpa

UF water purifier, water filter, water purifier, straight drinking machine

MF

Removes solid particles, bacteria, etc., at a filtering particle size of 0.002-0.1UM and an operating pressure of 0.1-0.25Mpa

MF water purifier, water filter, water purifier, straight drinking machine

NF

Allows solvent molecules or certain low-molecular-weight solutes or low-priced ions to

Removes 30-50% of monovalent salts and 60-80% of divalent salts, at a general interception particle size of 0.01-1nm, an

NF water purifier, water filter, water purifier

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penetrate, without obvious boundary with RO

intercepted molecular weight of 200-1000 and an operating pressure of 0.5-1Mpa

RO

Through exerting a pressure higher than the osmotic pressure on one side of the liquid to be filtered, to compress the solvent in the original solution to the other side of the semi-permeable membrane, while preventing solute molecules from penetration

Removes more than 90% of monovalent and divalent salts, at an interception particle size less than 0.01nm, an intercepted molecular weight of 200-1000 and an operating pressure of 1-10 Mpa

RO water purifier, water purification machine, water filter, water purifier, straight drinking machine

Adsorption Utilizes the adsorption function of activated carbon

Adsorbs residual chlorine, organics and some heavy metals in water

Activated carbon water purifier, water filter

Ion exchange

Adopt the cation exchange interaction to use ions to exchange resins

Removes calcium and magnesium ions in water and reduce water hardness

Softening water purifier, water softener

Table 1 Technical Terms and Concepts Relating to Commercial Water Purifier. Data source: GEP Research.

At present, the commercial water purifier products sold in the Chinese market mainly include commercial

water purifier, commercial water purification machine, public water drinking platform, public direct

drinking dispenser, commercial pipeline machine, central water purifier, central water softener, automatic

water vending machine and water heater (step-by-step type, bar table).

Name Definition Core Water Purification Technology

Commercial water purifier

Water purifier is also called water cleaner or filter, which is used for sewage treatment. It almost has no difference with household water purifier, except for the water output. Commercial water purifiers usually adopt central water purifiers, which not only supply water for industrial uses, but also solve domestic water problems, such as daily drinking water, bathing water and washing water for workers.

Activated carbon, MF, UF, NF and RO

Straight drinking machine

This device provides direct drinking water in a similar way to domestic water purification equipment, which filters out impurities in tap water through a built-in filter element and outputs drinking water that meets quality standards. This kind of device is commonly used in public places such as parks, providing convenience for passers-by.

Activated carbon, UF, RO and NF

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Table 2 The Commercial Water Purifier Products Sold. Data Source: GEP Research.

Water purification machine

It refers to the water purification equipment that removes or reduces salts in water to a certain degree (main strong electrolytes that are soluble in water).

RO

Water boiler

The equipment that heats water through converting electric or chemical energy to thermal energy, with a capacity ranging from 2 liters to 200 liters and a power range from 600W to 22KW according to the needs of different user groups. It is often combined with commercial water purifiers for direct drinking water projects.

Activated carbon, UF and RO

Central water softener

It mainly uses ion-exchange resin to remove calcium and magnesium ions in the water, and reduces water hardness. Ion exchange technology

Public water drinking platform

It is an energy-saving water drinking platform, which mainly include drinking water equipment installed and applied in public places.

Activated carbon, UF and RO

Commercial pipeline machine

It is generally applied in offices, schools and other places, and is used together with water purification equipment. It contains a built-in PE water tank, through filling with clean water in advance, and then heating by heating tank and cooling by ice tank to produce hot and cold water for drinking. It is divided into wall-mounted pipeline and vertical pipeline. The pipeline machine with filtration system is also called straight drinking machine, which installed water purification equipment inside the pipeline machine, with a standard configuration of 5-level filtration and urban tap water as applicable water source, after 5-level RO membrane filtering (RO straight drinking machine) or 5-level UF membrane (ultrafiltration straight drinking machine) filtering, the filtered water directly enters the pipeline machine system, which could be directly consumed with heating and cooling functions.

UF and RO

Water vending machine

The equipment integrating centralized automatic water production function with automatic water selling function installed in the community provides users with pure drinking water 24 hours per day.

Activated carbon, UF and RO

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2. Analysis of the External Environment for Commercial Water Purifier Industry

2.1. Analysis of the Impacts of Macro Environment on Commercial Water Purifier Industry

2.1.1. China's per capita water resources Resource-based water shortage and quality-induced water shortage are the main causes of water shortage.

China is one of the countries with the poorest water resources around the world. Its per capita water

resource volume accounts for only 34.8% of the world average volume, which is far less than Canada, New

Zealand, Russia and other countries. The spatial and temporal distribution of water resources is uneven in

China. From a spatial point of view, water resources are concentrated in areas in the south of the Yangtze

River, while the northern areas such as Beijing, Tianjin, Hebei. The Northwest and Liaodong Peninsula are

particularly deficient in water resources. From a temporal point of view, the rainfall, affected by the

monsoon, in most areas is concentrated in summer. In addition, the water sources pollution has increased

the tension situation in water resources.

2.1.2. Problems and Pollution of Water Environment The problems related to water environment, on the one hand, are the consequence of ignoring the places

that should be treated. On the other hand, they represent the failure to meet the requirements of

discharge standards with respect to the treatment results. In recent years, China has attached increasing

importance to the treatment of water pollution. It has successively introduced the "river chief system" and

"lake chief system", which strengthened the treatment of black and odorous water bodies, raised urban

sewage treatment standards, and paid attention to rural sewage treatment. This series of treatment

measures have achieved certain results in improving the water environment in China, but the overall

situation is still grim.

2.2. Analysis of Technical Policy Environment Up to now, China has released 18 standards to regulate the development of the commercial water purifier

industry. With the official implementation of the Management Measures for Water Efficiency Labels and

the introduction of the National Standards for the Limit Values and Grades of Water Efficiency for Reverse

Osmosis Water Purifiers, China has also strengthened the constraints in the water purification market.

2.2.1. Implementation of the First Mandatory Standard in the Water Purification Industry

In November 2017, the General Administration of Quality Supervision, Inspection and Quarantine of the

PRC officially issued the national standard GB34914-2017, i.e., the Limit Values and Grades of Water

Efficiency for Reverse Osmosis Water Purifiers. It drew up a red line to strictly control water consumption

efficiency for implementing the strictest water resource management system. It became effective on

November 1, 2018.

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This standard specified the water efficiency limit values and the grades of reverse osmosis water purifiers

for household and similar uses, as well as the detection and calculation methods for the purified water

production rate. It divided the water efficiency of reverse osmosis water purifiers into 5 grades. It also set a

red line for the purified water production rate, i.e., the minimum purified water production rate should be

no less than 35% (grade 5 water efficiency). The reverse osmosis water purifiers below this limit were

prohibited from sale. Through setting the limit values of water efficiency, 30% of water purifiers with high

waste water rate would be eliminated from the market.

The promulgation of such standard indicates that China will compulsorily restrict the standardized

production in the water purification market, while forcing innovation in water purification technology, and

accelerating the industrial reshuffling in the next 2-3 years.

Water Efficiency Grade of Water

Purifier Grade 1 Grade 2 Grade 3 Grade 4 Grade 5

Purified Water Production Rate/% ≥60 ≥55 ≥50 ≥45 ≥35

Table 3 Water Efficiency Grade Index of Water Purifier. Data source: GB34914-2017 - the Limit Values and Grades of Water Efficiency for Reverse Osmosis Water Purifiers and GEP Research.

2.2.2. Gradual Improvement of Industrial Safety Standards At present, the safety standards involved in the water purification industry are mainly based on the general

requirements of GB4706.1-2005, i.e. the Safety of Electrical Appliances for Household and Similar Uses,

lacking professional safety standards for water purification equipment. In 2018, China has set up a project

and commenced to draft the safety standards for water purification products. The Special Requirements of

Safe Drinking Water Purification Devices for Household and Similar Electrical Appliances would highlight five

aspects, including protection against electric shock, heat hazards, mechanical hazards, fire hazards, and

poisoning hazards.

In addition, in 2018, the industry standards of QB/T4143-2018 - the Ultrafiltration Water Purifiers for

Household and Similar Uses and QB/T4144-2018 - the Reverse Osmosis Water Purifiers for Household and

Similar Uses were developed. They have regulated the production and sales of water purification products,

and have directed the path towards quality upgrade and clear consumption.

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3. Demand Analysis and Prospect Forecast Concerning the Commercial Water Purifier Industry in China

3.1. Demand Market Capacity and Market Penetration of the Commercial Water Purifier Industry

In recent years, the commercial water purifier market has developed rapidly in China, especially since the

growth rate of the household market slowed down in 2015. The commercial water purification has shown a

unique outshining status with a huge future development space, which is a growth pole in the water

purification industry. According to the data collected by GEP Research, the market scale of the commercial

water purifier industry in China increased from RMB 7.8 billion in 2013 to RMB 18.6 billion in 2017, with an

annual compound growth rate of approximately 24.3%. From the perspective of development trends, the

commercial water purification field shows strong growth potentials. It is expected that the market scale of

the commercial water purifier industry in China will grow at an annual compound growth rate of 18.8% in

the next 5 years. In 2018, the market scale of the commercial water purifier industry in China reached RMB

22.3 billion and by 2022 it will reach RMB 44 billion.

Figure 1 2013 – 2022 Market Scale of the Commercial Water Purifier Industry in China. Data source: GEP Research.

Compared to developed countries, the market penetration rate of the water purifier industry in China is

very low. At present, it is about 21.7%, while the penetration rate of the water purifier industry in South

Korea is about 84.6%, in Japan is about 78.8%, and in the United States and the European Union are 72.9%

and 70.1% respectively. The low penetration rate of the water purifier industry market is mainly caused by

the following reasons. First, compared with developed countries, the urbanization rate is relatively low and

the total volume of the water purifier industry is correspondingly small in China. Secondly, for a long time

consumers have used boiled water as the main source of drinking water, therefore, they lack relevant

knowledge about water purification processes. In addition, secondary pollution is more likely to occur in

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barreled water, pipeline networks, and secondary water supply, but the consumer do not have a

comprehensive understanding of secondary pollution. With the improvement of urbanization and

education level, the market penetration rate of the water purifier industry in China is expected to reach

37.9% by 2022.

In terms of commercial water purification, compared with the penetration rate of water purification market

in developed countries, the public water purification services in China are still very backward. According to

the data, the public drinking water services are developed in Europe, America, Japan, South Korea and

other countries, with a penetration rate of commercial water purifiers all reaching more than 80%, while

the penetration rate of commercial water purifiers in China is very low, at a rate of less than 10%.

Therefore, there is a large market potential based on the low penetration rate of commercial water

purification in China, and the medical institutions, government agencies, universities, commercial buildings

and other public places have huge demand for water purification.

3.2. Demand Prospects for Subdivided Products of Commercial Water Purifiers From the perspective of subdivided product structure, reverse osmosis technology products occupy the

dominant position in the commercial water purifier market, with a market share of more than 80%. The

proportion of nano-filtration technology in purified beverage equipment has also increased. Out of the

pursuit of water quality safety, the proportion of reverse osmosis machines in commercial water purifiers

will further increase in the future. In 2017, according to the statistical data of GEP Research, the market

scale of the reverse osmosis commercial water purifier market in China reached RMB 15.25 billion. It is

estimated that the market scale of the reverse osmosis commercial water purifier market in China will grow

at an annual compound growth rate of 19.6% in the next five years and will reach RMB 37.4 billion by

2022. The market scale of nano-filtration commercial water purifier market will grow at an annual

Figure 2 2017-2022 Market Penetration Rate of the Water Purifier Industry in China. Data source: GEP Research.

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compound growth rate of 23.8%, and will reach RMB 3.08 billion by 2022.

Time

Market Scale (RMB 100 Million)

Reverse Osmosis Ultrafiltration Nano-

filtration Activated

Carbon Other

2017 152.5 15.8 10.6 5.8 1.9

2022e 374 22 30.8 8.8 4.4

Expected Compound Growth Rate 19.6% 6.8% 23.8% 8.8% 18.8%

Table 4 2017-2022 Market Scales of Subdivided Technology Products of Commercial Water Purifier in China. Data source: GEP Research.

3.3. Demand Development and Driving Factors The increasing serious water pollution, the relatively low market penetration, the huge market potential

and the lower water purifier use costs have become the main factors driving the development of the

commercial water purifier market.

3.3.1. Increasingly Serious Water Pollution Water is the source of life. However, due to the lack of safety awareness, water pollution has become a

serious environmental problem in China. Each year, there are thousands of water pollution accidents

endangering the environment and human health. The sources of water pollution are mainly from industrial,

agricultural and sanitary wastewater. A large number of lakes, rivers, reservoirs and groundwater are no

longer drinkable due to severe pathogenic microorganisms, metal ions, and chemical pollutants. Many

pollutants cannot be removed by traditional water treatment methods, and secondary pollution is likely to

occur in the transportation and storage process of drinking water. Even after removing the pollutants,

Figure 3 Market Share Trend for Subdivided Technology Products of Commercial Water Purifier in China. Data source: GEP Research.

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boiled water is still not drinkable because some metal ions and chemicals cannot be eliminated by boiling.

3.3.2. Low Penetration Rate and Large Potential of Commercial Water Purification Market

The motivation that promotes the development of commercial water purifiers mainly comes from the low

market penetration and huge market potential. In the office buildings, hospitals, schools, restaurants, and

other commercial facilities that stress the importance of the safety of drinking water, there is usually a huge

flow of people. However, most public facilities still mainly rely on traditional drinking water methods such

as boiled water and bottled water. Through installing water purifiers in these commercial facilities, it could

effectively solve part of the drinking water health and safety issues.

The drinking water market in China is divided into residential drinking water market and commercial

drinking water market. According to the statistical data of GEP Research, the commercial drinking water

consumption in China has maintained a steady growth, with a total consumption volume of commercial

drinking water increasing from 319.6 billion liters in 2013 to 344 billion liters in 2017, and is expected to

further increase to 378.4 billion liters by 2022. The consumption volume of commercial drinking water

treated through water purifiers increased from 33.4 billion liters in 2013 to 81.2 billion liters in 2017 at an

annual compound growth rate of 24.9%. It is expected that the consumption volume of commercial

drinking water treated through water purifiers will continue increasing at an annual compound growth rate

of 13.7% in the next five years.

At present, the commercial drinking water in China mainly includes boiled water, packaged water, and

water treated by water purifiers. In the commercial sector, boiled water is still the most commonly used

method of drinking water, mainly because of its low price and because the most commercial consumers are

still used to drinking boiled water. In particular, some large commercial areas, such as factories, public

institutions, and government organizations often employ workers to be responsible for boiling water, filling

water into thermos bottles and distributing these bottles to company employees. In addition, in virtue of

the relatively high holding capacity of drinking dispensers, according to the statistical data of GEP Research,

the proportion of bottled water increased from 24.2% in 2013 to 32.2% in 2017. In the future, the

proportion of bottled water will continue to increase, but its growth rate will slow down. It is expected that

the proportion of water treated by water purifiers in the commercial drinking water consumption volume

will continue maintaining a rapid growth trend, and the proportion of consumption volume of commercial

drinking water treated by water purifiers will increase from 23.6% in 2017 to 40.8% in 2022

The high-level training program Sicab – Sino Italian Capacity Building for

Environmental Protection is supported by IMELS – ITALIAN MINISTRY FOR

THE ENVIRONMENT, LAND AND SEA.

Sicab is included within the SINO-ITALIAN COOPERATION PROGRAM FOR

ENVIRONMENTAL PROTECTION (SICP). SICP was launched by IMELS – the

Italian Ministry for the Environment, Land and Sea and MEE – the

Chinese Ministry of Ecology and Environment.

Sicab consortium includes five partners: Politecnico di Milano (Lead Partner), Euro-Mediterranean Center

on Climate Change, Italy China Foundation, Fondazione Politecnico di Milano, Sapienza University of Rome.

www.sicab.net @sicabItaly

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